Distribution

Channel Objectives Marketing channels exist to create utility for customers Place utility—availability of a product or service in a location that is convenient to a potential customer Time utility—availability of a product or service when desired by a customer Form utility—availability of the product processed, prepared, in proper condition and/or ready to use Information utility—availability of answers to questions and general communication about useful product 12-1 features and benefits

Distribution Channels: Terminology and Structure Distribution is the physical flow of goods through channels Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service

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Distribution Channels: Terminology and Structure Distributor—wholesale intermediary that typically carries product lines or brands on a selective basis Agent—an intermediary who negotiates transactions between two or more parties but does not take title to the goods being 12-3 purchased or sold

Consumer Products

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Peer-to-Peer Selling The Internet and other related media are dramatically altering distribution Ebay pioneered P2P and now helps Disney and IBM set up websites for fixed price selling as well as B2C auctions Interactive TV may become a viable direct marketing channel in 12-5 the future

Door-to-Door Selling Mature form in the United States Growing popularity in China—AIG Insurance, Mary Kay, Tupperware, Avon, Amway One-half cars are sold door-to-door in Japan

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Consumer Channels Manufacturer-owned stores Walt Disney opening 600 new stores globally Nike, Levi Strauss, Apple

Independent franchise Independent retailers Wal-Mart 12-7

Consumer Products Piggyback marketing Channel innovation that has grown in popularity One manufacturer distributes product by utilizing another company’s distribution channel Requires that the combined product lines be complementary and appeal to the same customer 12-8

Industrial Products

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Establishing Channels Direct involvement—the company establishes its own sales force or operates its own retail stores Indirect involvement—the company utilizes independent agents, distributors, and/or wholesalers Channel strategy must fit the company’s competitive position and marketing objectives within each national market

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Working with Channel Intermediaries Select distributors—don’t let them select you Look for distributors capable of developing markets, rather than those with a few good customer contacts Treat local distributors as longterm partners, not temporary market-entry vehicles 12-11

Working with Channel Intermediaries Support market entry by committing money, managers, and proven marketing ideas From the start, maintain control over marketing strategy Make sure distributors provide you with detailed market and financial performance data Build links among national distributors at the earliest opportunity 12-12

Global Retailing Department stores Specialty retailers Supermarkets Convenience stores Discount stores and warehouse clubs

Hypermarkets Supercenters Category killers Outlet stores

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Top 10 Global Retailers 2005 Sales; Millions 1. 2. 3. 4. 5. 6. 7. 8. 9.

Wal-Mart USA $285,222 Carrefour France 90,297 Home Depot USA 73,094 Metro AG Germany 70,094 Royal Ahold Netherlands 64,615 Tesco UK 62,284 Kroger USA 56,434 Sears USA 55,800 Rewe Handelgruppe GER 50,698 10. Costco USA 48,107 12-14

Global Retailing Environmental factors Saturation in the home-country market Recession or other economic factors Strict regulation on store development High operating costs

Critical question What advantages do we have relative 12-15 to the local competition?

Classifying Global Retailers

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Global Retailing Strategies Organic growth Company uses its own resources to open a store on a Greenfield site or acquire one or more existing retail facilities

Franchise Appropriate strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing 12-17 structures

Global Retailing Strategies Chain acquisition A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country

Joint venture This strategy is advisable when culturally distant, difficult-to-enter markets are targeted 12-18

Global Retailing Strategies

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Innovation in Global Retailing Innovation takes place only in the most highly developed systems. The ability of a system to successfully adapt innovations is directly related to its level of economic development. Even when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressures. The process of adaptation can be greatly accelerated by the actions of aggressive 12-20 individual firms.

Innovation in Global Retailing

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Supply Chain Definitions Supply chain Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products, and making them available to customers

Logistics The management process that integrates the activities of all companies to ensure an efficient flow of goods through the supply chain 12-22

Physical Distribution, Supply Chains, and Logistics Management Order processing Includes order entry in which the order is actually entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery

Warehousing Warehouses are used to store goods until they are sold Distribution centers are designed to efficiently receive goods from suppliers, and12-23 then fill orders for individual stores or

Physical Distribution, Supply Chains, and Logistics Management Inventory management Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items

Transportation The method or mode a company should utilize when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water. 12-24

Transportation

Channel strategy—analyzing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation 12-25